For miners in Norway, is bitcoin mining worth it still?
Bitcoin mining may no longer be as profitable as it used to be as the country’s lawmakers are moving to increase electricity tariff for Bitcoin mining companies citing emission of greenhouse gases.
The legislators are also hinging their decision of the fact that the industry does not employ many people.
The decision to increase the tariff for Bitcoin miners has met with criticism considering that Norway is one of the countries generating most of its electricity through cleaner green technologies such as hydropower and wind energy.
Astronomical Increase for Bitcoin Mining Companies
The astronomical increase in tariff which will take effect in January will see bitcoin miners currently paying 0.48 Øre pay 16.58 Øre. A situation that critics say will move mining investments to other countries.
The policy has been criticized because many of the countries that have the most miners such China are known to depend on fossil fuel for power generation.
Discouraging Norwegian Miners Will Increase Greenhouse Emission
Critics are saying that discouraging Norwegian cryptocurrency mining industry will invariable lead to migration to countries that use less green energy production methods.
The legislators are unfazed nevertheless, they are of the opinion that Bitcoin mining industry does not contribute considerably to the employment market since mines do not need many employees.
Reacting to the news, CCN publisher Jonas Borchgrevink, who is Norwegian released a statement, in which he wrote,
“Norway is one of the greenest nations on earth when it comes to the production of electricity. 99 percent of the electricity is produced by hydropower, and we continue to expand with wind power-, offshore wind power-, solar energy- and bio-energy facilities. From January 2018 to October 31st 2018, we exported 15 071 492 MWh, imported 6 321 079 MWh with a total “net profit” of 8 750 413 MWh. We are in excess of green energy.”
It is not clear the reason why the lawmakers are taking the stance. Critics are asking if every industry that does not employ many staff should be closed or if those that automate and reduce their staffing should be shown the way out of business.
Bitcoin – A Dirty Form of Cryptographic Output
Speaking to a news outlet in the country Aftenposten.no, Lars Haltbrekken a parliamentary representative told the media that,
“Norway cannot continue to provide huge tax incentives for the most dirty form of cryptographic output as bitcoin. It requires a lot of energy and generates large greenhouse gas emissions globally.”
Condemning the policy, Jonas Borchgrevink said that it made no sense that a green energy country such as Norway would embark on a policy that would indirectly encourage the emission of greenhouse gases by making it difficult for miners to operate from the country.
Borchgrevink said that the policy smacks of hypocrisy urging the legislators to instead enact laws that would discourage or shut down Norwegian oil companies producing billions of barrels in offshore crude.
Total production rose in 2017 for the fourth consecutive year, and gas sales were at a record high. Never before has so much gas been sold from the Norwegian shelf as was the case in 2017. In the next few years, total production is expected to remain high.”
High Energy Cryptographic Mining Has Come to Stay
An eminent economist Roger Schjerva said that the policy is effectively going to cost many municipalities in jobs and tax revenues because the parliamentarians do not understand that cryptocurrency mining has come to stay as segment of an industry we will be living with far into the future.
Gjermund Hagasæter, a spokesperson for Kryptovault, one of the prominent crypto-service companies in Norway reacting to the news said,
“If this is correct, it will be a complete disaster for the cryptocurrency industry in Norway. This gives a terrible signal to foreigners that are thinking of investing in Norway.”
Some analysts believe that the move was aimed at raising funds to balance the budget by taking advantage of an emerging sector. It seems that the Norwegian mining industry has been made the scapegoat for the budget with the hope that the miners will take the increase in electricity tariff in stride.
China, the country where most bitcoins are mined is still generating most of its energy from coal which produces massive volume of greenhouse gases that has been identified as the main culprit for greenhouse effects such as deletion of ozone layer.
Policy Will Have Little Effect On Global Mining For Bitcoin
A Bitnodes report shows that there are just 40 Bitcoin nodes operat from the country. Although there are many people using the premier cryptocurrency mining interchangeably with other mining operations because they think that every miner is mining bitcoin. The data implies that the mining operations in Norway do not number in their thousands.
The policy may not have any effects on the global mining operation for Bitcoin, however its effect on the perception of Norway as a mining haven will definitely change.
The Scandinavian and North Atlantic countries such as Iceland have been deemed mining friendly but with the recent policy summersault from Norway, mining companies will think twice before moving to the country in view of many others with more friendly policies.
Tough Policy For Norweghian Miners
Is bitcoin mining worth it for the Norwegians? Northern Bitcoin, a mining company operating in the country was quoted by Forbes as saying that it costs $7,700 to mine one bitcoin in Norway. If this figure is accurate, it means that with the price of Bitcoin at less than $5000, miners in the country are already operating at losses.
The new policy will make it even tougher to operate from the country. Although the profitability of mining operations depends on a number of factors such as the size of the mine, the larger mines with many miners will break even quicker because they are able to mine more blocks.
This is the reason mining operations are pooling their resources together to form mining pools thereby standing more chance of mining the bitcoin blocks in a process that has been described as very competitive.
The mining difficulty of Bitcoin increases over time. This is why miners need greater incentives to remain in business, incentives which some countries have given willingly to encourage the new technology. Others such as Norway are not willing to make that concession. In any case, mining is business and countries need money.